By the end of March 2017 the volume of purchased assets will be 80 billion EUR per month, as planned, after which it will fall to 60 billion EUR per month. The ECB’s decision effectively means that the program will cost additional 540 billion EUR or a total of 2.28 trillion EUR. The planned incentives can continue beyond the end of 2017 if the European Central Bank deems necessary and until the Governing Board of the bank sees consistent correction in the trajectory of inflation consistent with the target level of 2%.
“Meanwhile, if the outlook becomes less favorable or financial conditions do not meet the consistent progress towards the correction of the trajectory of inflation, the Board intends to expand the program with regard to the amount and/or duration of action”, says the statement. “To ensure smooth implementation of the plan for the purchase of assets, the Board decided to modify certain parameters of the program will be clarified during the press conference and in a separate press release”
Considering the interest rates, as expected, they remain unchanged. The interest rate on the main refinancing operations standing at 0%, and the marginal lending facility is 0.25%. The deposit rate is in negative territory at a rate of -0.40%.
The extension to QE is much longer than we expected, but the tapering announcement is almost hawkish, a mere three days after the Italians voted No in its referendum.
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